A decrease in the price level
A) shifts the SRAS curve to the right.
B) shifts the SRAS curve to the left.
C) causes an upward movement along the existing SRAS curve.
D) causes a downward movement along the existing SRAS curve.
E) none of the above

Question

Quizplus · Accepted Answer

A decrease in the price level will cause a decrease in the costs of production for firms, leading them to increase their output and causing a movement down along the existing SRAS curve. This is because firms will be willing to produce more at the lower price level due to the lower costs of production.

A Decrease in the Price Level